S&P 500: Buying opportunity for prudent investors – JP Morgan

Not every earnings recession was accompanied by an economic recession, but every economic recession was accompanied by an earnings recession as it can be been in S&P 500 earnings per share (EPS) numbers, David Lebovitz from JP Morgan Asset Management brief.

Key quotes

“The average decline in S&P 500 EPS during economic recession was -17.2%. Our own models currently point to a drawdown in earnings of -15.2%, well below current consensus estimates and generally in line with the historical experience.”

“As the clouds begin to break, the market will start to price in a ‘virus-free’ run-rate for earnings. At that point, equities should resume their upward ascent.”

“We are focused on quality companies in the short/medium term. This leads us to sectors like consumer staples, technology and health care.”

“Because this event is transitory, the prudent investor will view it as a buying opportunity, while understanding that volatility is unlikely to subside anytime soon.”